US bank First Citizens said Monday it has agreed to buy all the loans and deposits of Silicon Valley Bank, whose bankruptcy this month sparked global fears about the sector.
SVB, a key lender to the technology industry since the 1980s, became the biggest US bank to fail since 2008 when regulators seized it after a sudden run on deposits.
Regulators created Silicon Valley Bridge Bank out of SVB after the bankruptcy, and that entity will be absorbed by First Citizens starting Monday.
First Citizens said it had agreed to purchase “substantially all of the loans and certain other assets and to assume all of the customer deposits and certain other liabilities of Silicon Valley Bridge Bank.”
“The transaction is structured as a bank-wide purchase with shared loss coverage,” it said in a statement.
The text also notes that the 17 former SVB branches will open on Monday as “Silicon Valley Bank, a division of First Citizens Bank.”
The US Federal Deposit Insurance Corporation (FDIC) said on Sunday that the transaction covers $119 billion in deposits and $72 billion in assets.
SVB depositors “will automatically become First Citizens Bank depositors,” added the FDIC, which will continue to insure deposits.
Together with the FDIC, the US Treasury and the Federal Reserve had put in place plans to ensure that SVB customers could access their deposits, while the Fed introduced a new lending tool for banks in an effort to prevent them from repeating the rapid disappearance of the SVB.
The bankruptcy of the SVB triggered a crisis of confidence among clients of similarly sized US banks, with many withdrawing their money and depositing it with larger banks, considered too large for the government not to bail them out in the event of a crisis.
The turmoil also spread to Europe, where the struggling Swiss bank Credit Suisse was taken over by UBS.
More recently, shares of long-troubled Deutsche Bank fell sharply on Friday as the bank’s default cover costs rose, reigniting fears of a widening crisis in the banking sector.
Despite fears of global contagion, central banks have continued to tighten monetary policy to fight inflation, although the problems in the banking sector have been related to their rate hikes.
